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The Practice

Multi-owner firms with $100M–$1B in assets had 48% higher EBITDA multiple, Wealth Solutions Report column says

The column's author, writing from FP Transitions, urges owners to ask whether growth reached margins and whether the firm could run without them.

At a glance

15-second brief
  • Multi-owner advisory firms carried a 48% higher EBITDA multiple than single-owner firms, according to a Wealth Solutions Report column written by an author at FP Transitions.

  • Founder dependence is the question the column says most owners skip.

Multi-owner advisory firms carried a 48% higher EBITDA multiple than single-owner firms, according to a Wealth Solutions Report column written by an author at FP Transitions. The figure comes from a study the author says was conducted a couple of years ago across firms with $100 million to $1 billion in assets.

The column says the gap makes sense from the buyer's side, framing it around the work of finding, attracting, training and keeping next-generation owners. A firm that has not done that work hands it to the buyer, who prices it in. A firm that has done it gets paid for the result.

The first question the column puts to owners is efficiency: whether revenue growth is showing up in stronger margins and better productivity, or whether expenses and headcount are climbing just as fast. The premise is that a profit-and-loss statement will not say whether the business became more valuable and more transferable over the past 12 months.

The question most owners skip

Founder dependence is the question the column says most owners skip. Would the team keep clients, make good decisions and keep growing if the owner were not in every meeting? The column's answer is that this does not happen on its own. It takes a real succession plan and deliberate delegation of parts of the owner's job, whether that is day-to-day management or business development.

It also takes giving up the idea that one person will replace the founder. The column's rule of thumb, which it attributes to FP Transitions, is two second-generation owners for every first-generation owner, and three third-generation owners further out. What one person can run at $100 million may take several people at $1 billion.

The 48% measures a gap between two groups of firms; it is not evidence that adding an owner raises a firm's multiple by that amount. What the column supplies instead is a mechanism: ownership depth is something a buyer can inspect, and something an owner can build on a timetable, well before there is a transaction to consider.

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Wealth Solutions Report
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